Little change this tax season

PRESCOTT/HOPE – Brad Crain, with Dalrymple-Crain Accounting, said there are few changes for the 2017 tax season.

In fact, he said, the tax laws are pretty much the same as they were last year and the same deductions apply. Crain continued saying the tax package passed by Congress in December won’t make any difference in people’s 2017 taxes, but will in their 2018 taxes.

In fact, there will be plenty of changes next year because of the new tax laws. One will see new tax tables with lower rates. There will be seven brackets with the taxes ranging from 10 percent to 37 percent based on income. The 37 percent bracket will be for those making more than $500,000 a year, not something most will have to worry about. This year, the lowest bracket has a 12 percent tax, while the highest is at 39.6 percent.

The standard deductions have been increased as well for next year, but the new law eliminates personal exemptions, which could affect a lot of people. Child tax credits, though, have almost doubled. The end result, Crain said, is because of these changes, people will be taking home more in their paycheck as less is being withheld, but there will be fewer who need to itemize their taxes because of the loss of exemptions. “This will hurt some people,” he said.

But, he continued, when it comes to unreimbursed employee expenses, which have been eliminated for 2018, those people who have flexibility with their bosses may be able to make arrangements to be paid less and get reimbursed for their out of pocket expenses. In the long run, according to Crain, this would help both employer and employee as the employer would be paying out less in payroll taxes, while the employee, though getting a bit less up front, would be getting paid for the expenses they’re currently paying themselves.

There will be a break for those with 529 college plans. In the past these funds could only be used for college expenses. Any other use resulted in the funds being taxable income. Under the new plan, the money can be used for other reasons, but must come from the 529 plans. Additionally, 529 funds can be used to pay for tuition to private schools next year, but not this year.

One of the major changes in the tax situation is the removal of penalties for individual mandates for health insurance. However, it must be noted this change won’t take effect until the 2019 taxes are due in 2020.

The so-called marriage penalty has been greatly reduced, almost to the point of being gone. The amount that can be donated to charity and taken off taxes will also increase in 2018 as taxpayers will be allowed to deduct donations of up to 60 percent of their income. But, donations made to a college in exchange for the right to purchase athletic tickets won’t be deductible any longer. The threshold for medical expense deduction has been reduced from 10 percent of adjusted gross income to 7.5 percent.

Deductions that are disappearing include: casualty and theft losses (except when attributed to a federally declared disaster); unreimbursed employee expenses; tax preparation expenses; other miscellaneous deductions; moving expenses; and employer-subsidized parking and transportation reimbursement.

It must be stressed, though, these changes have nothing to do with 2017 taxes as they did not go into effect until 2018.